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Global Employment Law Update - United Kingdom

Employment status is crucial to employment rights and protections in the UK. At the moment, "employees" have a full range of rights, including protection from unfair dismissal, whereas "workers" have more limited protections, such as working time rights (although they are protected under discrimination legislation). Those who are genuinely self-employed have no employment rights. This may be about to change, however. It is not always clear on which side of the line a particular arrangement falls; ultimately whether someone is a worker or an employee can only be definitively established by an employment tribunal, meaning that the employment status and rights of an individual are not clear, which has long been regarded as unsatisfactory. At fairly regular intervals, there have been calls for a thorough review of the law in the UK but the pressure has increased recently because of the rapid growth of the "gig" economy – around one in five workers in the UK now has non-standard employment arrangements, such as self-employment, zero hour contracts or temporary work. It is now a real possibility that we will see legislative changes to make the distinction between workers/employees/self-employed clearer.

Initially the government focused its attention in this area on zero hours contracts – ones where the employer does not guarantee any hours of work. Exclusivity clauses – restrictions preventing workers from working for anyone else (or preventing them from doing so without the employer's consent) – are now invalid and unenforceable.

Then last year one of Theresa May's first initiatives as Prime Minister was to announce the Taylor Review – an investigation into employment rights in the modern labour market. The Taylor Review will focus in particular on:

Do emerging business practices strike the correct balance between flexible labour on the one hand and benefits such as higher pay and greater work availability on the other?

Is access to benefits such as the minimum wage, maternity and paternity rights, automatic pension enrolment, sick pay and holiday pay undermined by the new forms of employment?

Does the definition of employment status need to be updated to reflect new forms of working and emerging business models?

Are alternative forms of worker representation needed?

Parliamentary Committees, who take evidence from stakeholders in open sittings, have become increasingly prominent in the UK recently, particularly on employment related issues. After investigations into controversial working practices at Sports Direct, a high street retailer, one Committee has launched an inquiry into "the future world of work", focussing on the employment status and working practices of agency workers, the self-employed, and those working in the gig economy. This is likely to cover much of the same ground as the Taylor Review.

Meanwhile there have been some employment tribunal decisions where gig economy workers have been able to claim employment protection. The tribunal's job in these cases, following the seminal Autoclenz Supreme Court decision, is to have regard to the written terms but also to determine the true effect of the agreement between the parties, based on what actually took place and was therefore presumed to be what the parties intended.

For example, one tribunal recently decided that a cycle courier was a worker, despite the courier firm's contractual documents describing her as a self-employed contractor. The company was under no obligation to provide work and she wasn’t required to work. But the tribunal thought that there was a discrepancy between the documentation and the reality and, in accordance with Autoclenz, they had to explore the true situation. The tribunal concluded that, in reality, the claimant was fully integrated into, and working for, the business. She was providing personal services for her employer within the definition of a "worker" during the time she was on the circuit and was therefore entitled to paid holiday in respect of that time.

Then in February this year, the Court of Appeal in Pimlico Plumbers Ltd v Smith upheld a tribunal's decision that plumbers were workers, despite being labelled and taxed as "self-employed". The judgment largely turned on the relationship between what the Court described as "contradictory and ill thought out contractual paperwork" and what happened in practice. The Court decided that Mr Smith was under an obligation to provide his services personally, because there was no express or implied power of substitution in the agreement that would have allowed him to delegate his work to someone else. The fact that there was an informal limited concession that allowed him to allocate work to another Pimlico operative did not change the position. He was also required to work 40 hours a week and this was inconsistent with self-employed status. Taken with other factors, such as the degree of control exercised by Pimlico Plumbers and onerous restrictive covenants, the tribunal was entitled to conclude that the relationship was one of worker and employer rather than self-employed business and customer.